Delaware’s Secret Corporate Court Asks for Supreme Court Review

A secret court in Delaware that settles disputes between companies wants the U.S. Supreme Court to validate its work so it can continue to offer dispute resolution outside the view of the media and the public.

In Delaware, which has a long history of being very friendly to corporations, a special, closed-door system was set up using judges from the state’s Court of Chancery. Essentially, businesses at odds with one another could rent judges and courtrooms for $6,000 a day (plus a filing fee of $12,000) to arbitrate settlements and judgments. At least $1 million had to be at stake in the dispute.

Cases tried under this system were kept secret, from beginning to end. Filings were not docketed, the courtroom itself was closed off to the public, and the outcome of proceedings was disclosed to no one, including the public and the media.

This system was established by a 2009 law adopted by the Delaware legislature, whose lawmakers feared the growth of arbitration proceedings in other states was causing their state to lose its competitive edge.

But open-government advocates and news organizations objected to the new rent-a-court system, arguing it was unconstitutional. They sued the state and, in 2012, won their case before a federal district court judge and again, in a split decision, before a panel of appellate judges. The rulings meant the secret corporate court could not continue, forcing Delaware judges who favor the system to petition the U.S. Supreme Court to review the matter.

The justices have yet to announce whether they will hear the case.

In the meantime, opponents of Delaware’s special court are calling for the Supreme Court to reject the petition and allow the lower court rulings to stand.

“This program is created to take advantage of the reputation of the Court of Chancery, that makes it unique to Delaware and not the type of case the Supreme Court should take,” David Finger, attorney for the Delaware Coalition for Open Government, wrote in a brief submitted to the court.

Judith Resnik, a Yale University law professor, concurs with the coalition, saying the Supreme Court should stay out of the case.

“The Delaware legislation is a dramatic example of rich litigants using their resources to close court systems that taxpayers support and constitutions require. But the problem goes beyond Delaware. To honor constitutional commitments that ‘all courts shall be open,’ the court should refuse the Delaware judges’ request, and Congress should restore rights to public courts for consumer and employment disputes,” Resnik wrote in an op-ed published in The New York Times.